Too volatile

 

AFTER the ‘fryday’ on D-Street that roasted his stocks mercilessly, business tycoon Mr. Gautam Adani has a firefighting job at hand. Stung by the damning report by Hindenburg Research, a US-based investor research firm which has accused the Adani group of engaging in brazen stock manipulation and running shell companies, the Adani stocks have taken quite a hammering and fell up to 20 per cent two days running. It was largely a telling factor in the rout that the BSE and NSE Nifty witnessed after over a month. The markets have clearly panicked after the Hindenburg report on the fastest growing business conglomerate in India and Mr. Adani, now, has a lot of damage control to employ to arrest further slide in his company’s reputation and his own image. The plunge in Adani stocks was frightening as it pushed Mr. Adani to the seventh position on the world’s richest people list from the coveted third position. The rise, too, was purely on the meteoric highs that the Adani group stocks achieved in the last couple of years. From a school drop-out, Mr. Gautam Adani turned a billionaire in rapid strides which has put his rise under scrutiny for all these years. The Hindenburg Research report has given a new arsenal to Mr. Adani’s detractors who keep finding something fishy in his business style.

 

The report released by the US firm has raised questions over Adani group’s high debt levels and “highly leveraged stocks”. It has accused the group of using shell companies based in tax havens and negative cash flows. Though the group has questioned the timing of release of the report and called it ‘malicious and baseless’, it would have to do some answering on the debt levels and high valuations of its stocks. The Adani stocks have certainly seen an unprecedented rise in valuation in the last few years. Stocks of his seven listed companies surged in high percentage with some going up by more than 1,500% in the last three years. It has resulted in the group making forays into multiple sectors starting from being a ports operator. The expansion spree and its speed has raised many eyebrows. It is now time for the regulator and the Adani group to clear the clouds. Over the years, the Adani group has remained a favourite for investors. Be it the institutional investors or retail shareholders, the Adani stocks have always remained hot picks for their handsome returns. Yet, a question remains over the high level of borrowing and the revenue generated on equity.

 

To be fair to Mr. Gautam Adani, his firm has been very open about the high debts from banks and financial institutions. The group has assured the investors and the regulator that the $23.34 billion borrowings are manageable and no investor should panic on false alarms. It would be ideal if the Adani group comes out in public about the entire business model to allay any fears and stop any “propaganda” that the country is being subjected to from foreign quarters. Already in the firing line for being close to Prime Minister Mr. Narendra Modi, the Gujarat business tycoon is no stranger to criticism. Mr. Adani also has a cunning knack of survival. He came out unscathed from a reported kidnapping in 1998. He was trapped in the 2008 terrorist attack on Hotel Taj Mahal in Mumbai but managed to escape the dining hall with the help of hotel staffers before being rescued by the security forces. The latest challenge is possibly the toughest of all. A lot is at stake this time -- the Adani group’s integrity and the large swathes of wealth invested by top government institutions. A tight scrutiny by the Security Exchange Board of India (SEBI) and other agencies would bring out the truth. However, another thing that needs to be probed is the timing of the release of the report by the US short-selling firm. It has come close on the heels of the BBC documentary. Coincidence?